How 'Flash Boys' Trading Is Wreaking Havoc In Crypto World

investopedia.com:

“Flash Boys”-like trading manipulation is becoming prevalent in the young cryptocurrency market and is estimated in the billions of dollars, per the new study conducted by researchers at Cornell Tech and other universities. Four of the five major cryptocurrencies plunged this week on news of the report, including Bitcoin, Ethereum, Litecoin and Ripple, when it was detailed in a story in Bloomberg.

The study says that manipulation has become prevalent on certain decentralized cryptocurrency exchanges (DEXes), and is likely rampant on centralized crypto exchanges as well. «We have no idea what the extent of the malfeasance is on centralized exchanges,» said Ari Juels, a professor at Cornell Tech during a blockchain conference at Cornell Tech’s New York City campus. “If we extrapolate from what we’ve seen on DEXes, it could well be on the order of billions of dollars."

The study's title is appropriately called, «Flash Boys 2.0,» because these trades are operating much like the ones in the famous Michael Lewis book, 'Flash Boys,’ in which traders use high frequency trading and market exploiting behaviors to win trades ahead of slow rivals. In the crypto case, special arbitrage bots move ahead of ordinary users’ trades on decentralized exchanges, per Bloomberg. These autonomous trading programs allow market manipulators to anticipate other traders’ movements and profit off of them. These traders also are able to get priority ordering by paying higher fees, allowing them to take advantage of practices including front running, the authors said in the report released last week.

How Crypto 'Flash Boys' Trade

Source: Bloomberg

DEXes, although still not the primary method of cryptocurrency trading, are growing in popularity as